City sources said that Authentic Brands has “deep pockets” and is considering bids for both retailers. The discussions put its Canadian chairman Jamie Salter in competition with Mike Ashley, the Sports Direct founder, who has conducted a long pursuit of Debenhams and has also suggested he could play a role in a rescue of Arcadia.

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With the help of heavyweight backers Mr Salter, 57, has emerged as the leading pandemic dealmaker in American retail after building a reserve of more than $US1 billion ($1.3 billion) to snap up struggling brands. His investors include the private equity arm of the world’s biggest asset manager, Blackrock.

Leonard Green & Partners has also backed Authentic Brands and could seek to recoup earlier losses made in business with Sir Philip. In 2012 the California fund paid about £350 million for a 25 per cent stake in Topshop and Topman, two of Arcadia’s strongest chains, to fund an ill-fated international expansion. By last year its equity had been wiped out by the company’s decay.

Authentic Brands, founded by Mr Salter in 2010, expanded to reach a turnover of $US15 billion before lockdowns laid waste to high streets and shopping centres. As well as several retail chains it owns the magazine Sports Illustrated and the image rights of Elvis Presley and Marilyn Monroe.

Mr Salter’s acquisition spree has accelerated in the pandemic, having declared that “we need bricks and mortar. Retail really needs it”.

He has snapped up bankrupt US retailers including Barneys and Forever 21. Authentic Brands has also acquired the bust formalwear specialist Brooks Brothers and is involved in an attempted turnaround of the department store chain JC Penney, in partnership with the shopping mall operator Simon Property Group.

Mr Salter now has transatlantic ambitions. Earlier this year Authentic Brands was named as a potential rescuer of Laura Ashley, although it was ultimately acquired by another bidder. On its website Authentic Brands says it still plans to open a London office “soon”.

City sources said the company’s financial firepower and desire for global distribution for its brands make it a serious challenger for Debenhams and Arcadia. Yet there is no certainty that Authentic Brands, Mr Ashley’s Frasers Group or any other potential bidder will agree a deal for either. Debenhams faces the more urgent crisis, after it collapsed in April for the second time in a year and failed over months to agree a rescue with bidders including Frasers Group and its sportswear rival JD Sports. It is now in line to be liquidated after Christmas if a rescue that would deliver better returns for creditors cannot be agreed.

Mr Ashley has made a series of offers that have been rejected but has returned to talks with administrators FRP Advisory and warned time is running out for him to save the chain.

Meanwhile Deloitte this weekend is in the early stages of attempting to extract the best return possible from Arcadia. First-round bids for all or part of the business are due by Friday. City sources said administrators aim to complete deals by February.

Project Kane is operating under strict secrecy, with potential bidders asked to sign what one described as “iron-clad” non-disclosure agreements. They forbid signatories from contacting the Competition and Markets Authority or the Pensions Regulator. Deloitte declined to comment.

Around 25,000 jobs are at risk if Arcadia and Debenhams cannot be saved.

Around 25,000 jobs are at risk if Arcadia and Debenhams cannot be saved.Credit:Getty Images

Arcadia went under with an estimated £350 million deficit in its pension schemes, which have roughly 10,000 members. Sir Philip and his wife Lady Tina, the company’s legal owner, are under pressure from MPs to “make good the deficit”. The Pensions Regulator and scheme trustees have avoided public confrontation, amid fears further damage to Arcadia could reduce administration returns that may help bridge the funding gap.

Potential bidders for Arcadia have been given glimpses of the decline of its brands and its failure to catch the online wave. Administrators have signalled they are open to a break-up of Sir Philip’s empire, given some parts are in a worse state than others. Previously undisclosed financial data shows that in the year to September 2019, the decline in Arcadia Group sales accelerated to £200 million, leaving it with an annual turnover of £1.6 billion.

Potential bidders have been told that three of its eight brands – Evans, Miss Selfridge and Outfit – contribute losses to high street operations, even before fixed costs such as rent push them further into the red.

Of the stronger Arcadia chains, Topshop is viewed by sources as most attractive to a bidder such as Authentic Brands. Its sales last year were £651 million, of which only £120 million were made online, where rival fast-fashion retailers such as Boohoo and Asos are thriving. Both have been speculated as possible bidders for Topshop, which is valued at about £200 million.

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Overall only 19 per cent of Arcadia sales are made online, and the figures indicate the Debenhams website makes a significant contribution, particularly for the Wallis and Dorothy Perkins brands.

Despite Arcadia’s slow digital progress, its online sales are more lucrative than its high street stores. Figures that offer potential bidders a proxy for operating profit show overall bricks and mortar margins of just 4.7 per cent, compared with 20 per cent online.

Suppliers to Arcadia were asked by Deloitte last week to agree to an 80 per cent discount for stock on its way to stores. In a letter seen by The Sunday Telegraph it wrote: “The companies in administration hold the legal title to all stock which has been released from your factory and therefore are not legally obliged to pay for any stock in this category.”

Authentic Brands did not respond to a request for comment.

Telegraph, London

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